Pests Have Put Sting Intoprice Of Cotton

Worldwide Shortages Have Caused Costs To Soar As Cotton Demand Continues To Rise.

April 7, 1995|By San Jose Mercury News

Pests are loose in the cotton fields of Asia, and you'll soon feel it in the shorts - the price of shorts, that is.

Cotton prices are soaring, the result of worldwide shortages, combined with booming demand for cotton shirts, pants, sheets and towels. A pound of cotton that last October sold for 65 cents peaked at $1.15 in early March before settling more recently near $1.

That's a boon for cotton farmers - including growers in the San Joaquin Valley - and U.S. taxpayers, who probably will save about $1 billion in crop-support payments this year. But costlier cotton ultimately means higher prices for consumers who buy an estimated $50 billion of cotton garments and furnishings each year.

Already, Fruit of the Loom says it has increased underwear prices by an average of 6 percent since last July, largely because it's paying more for cotton. Other manufacturers are more circumspect, but analysts say they have hiked or soon will hike prices as well.

''It's a big battle as to who eats the higher cost of cotton'' among manufacturers, retailers and consumers, said New York retailing analyst Edward Johnson. ''A certain amount is going to be passed on to you. . . . You'll gradually be paying more for your jeans.''

The price of jeans won't go up anywhere near as steeply as the price of cotton, analysts say, for several reasons. First, cotton makes up only a small fraction of the cost of garments; a $25 shirt may contain a pound or two of cotton, which even now costs less than $2. Second, big cotton users generally avoided the highest prices because they buy with long-term contracts.

Analysts say cheaper goods such as underwear are more likely to increase in price than expensive designer sweaters. That's because cotton accounts for a higher percentage of the cost of underwear, and there are much smaller markups to cushion the impact.

Cotton costs more today than a year ago because of the simplest economic concept - supply and demand.

Supplies of cotton fell last year because pests damaged crops in China, India and Pakistan, the world's three largest producers aside from the United States.

The result: Two years ago, those three countries - who together grow almost half the world's cotton - were exporting about 2 billion pounds of cotton a year, flooding the world's markets and lowering prices.